State awards billions in no-bid contracts

State government spends billions of taxpayers' dollars — nearly $6.5 billion in the last four years — through "no-bid" contracts, with little oversight or transparency.

It's a system ripe for overspending, malfeasance and cronyism. And it's one that apparently allowed corruption to fester for years, with the head of the state prisons system allegedly taking $2 million in bribes to hand out hundreds of millions of dollars in no-bid contracts.

A Clarion-Ledger analysis of state records in the wake of that scandal discovered not only a lack of accurate data on no-bid agreements but numerous contracts with little or no explanation.

In all, the state appears to have awarded at least 3,370 no-bid contracts since 2010, according to records from the Department of Finance and Administration. The deals to spend state and federal taxpayer dollars with 1,807 companies and individuals who didn't competitively bid for the work are worth nearly $6.5 billion.

These include contracts given to sole-source vendors, whose products and services state agency officials claim no one else can provide, contracts with those whose professions are exempt from bidding and "emergency" contracts. It also includes contracts with dollar amounts that fall below generous state thresholds for bidding.

Some state officials concede Mississippi government has a contracting system with thresholds for bidding that are too high and with too many exemptions. They also say there appears to be abuse of provisions for emergency contracts and overall lax oversight, provided primarily by a board of the same state agency leaders who are inking the contracts.

In general, state agency leaders within liberal limits can hire whomever they want for whatever price they decide.

Need to hire a motivational speaker? No bidding is required as long as it's under $100,000. Need an accountant or engineer? No bidding or approval needed because their services are exempt. Need a media consultant? No bidding is required if you declare it an emergency.

"At this point, I do not have proof that there is corruption (beyond the prisons scandal), but I think the Legislature in the past that set up this review board and system made it awfully easy for corruption to exist," said House Accountability, Transparency and Efficiency chairman Jerry Turner, who's leading the charge for reform.

Rubber stamped

The Mississippi Department of Corrections, subject of a federal investigation and indictment of commissioner Chris Epps, who has since resigned, awarded the most expensive no-bid contracts: 19 for a total of $4 billion. The Department of Transportation was next with 126 no-bid deals worth up to $2 billion.

The most prolific is the state Fair Commission, which signed 674 no-bid contracts worth $4 million, including a four-year, half-million dollar contract with Allied Waste Services to remove trash from the state fairgrounds, according to DFA records.

(UPDATE 12/22/2014: The Clarion-Ledger learned the Fair Commission awarded the trash contract after a competitive bid process involving at least three vendors. It appears it was incorrectly entered into the state's contract system, resulting in its inclusion on the no-bid list and providing another example of the human errors thwarting a true account of no-bid activity.)

Six dozen companies have no-bid deals worth $1 million or more. Among them are Management and Training Corp., a private prison company named in the federal bribery indictment, which had two contracts worth up to $2 billion.

The state awarded seven no-bid contracts worth $30 million to Ridgeland-based accounting firm Horne LLP and two worth $6.7 million to the law firm of former Attorney General Mike Moore, who is serving on a task force looking into MDOC contracts, to represent the state in litigation over the BP oil disaster.

DFA Director Kevin Upchurch said the contract amounts reflect the maximum allowable payment to a vendor, not the actual amount spent. Just because a contract is for $10 million, doesn't mean a state agency ends up paying that amount.

Upchurch cited one of his own agency's contracts worth $20,000 that, in the end, paid the vendor only a few hundred dollars.

Most of the state's no-bid contracts come under the limits that require competitive bidding — $100,000 for services — or are for services that are exempt. But many beyond that cap, which require approval from the Personal Services Contract Review Board, appear to be rubber stamped by the agency heads that serve on it, officials, including Gov. Phil Bryant, said.

Bryant said the current oversight would allow agency leaders on the board to approve sole-source contracts to get their own deals passed when the time comes.

"Single-source contracting ought to be very limited in scope," Bryant said.

Past warnings

Epps' indictment is prompting calls for state government contract reform, but officials have been warned of problems numerous times over many years, including by the Legislature's watchdog Performance Evaluation and Expenditure Review Committee.

Records show PEER warned lawmakers in 2011 about Epps awarding a no-bid contract for prison canteen services to the man now indicted as his alleged co-conspirator, then helping transfer the contract to another company that bought out the first.

Epps, as an agency head, served on the contract review board when it signed off on the no-bid contracts, which federal investigators say was the genesis of a massive kickback scheme.

Records show PEER has also warned lawmakers over the course of more than a decade that:

Competitive bidding is thwarted by thresholds that allow large no-bid contracts and exemptions.

State government has a "revolving door" where officials retire or quit, then they or their companies are hired back by their agencies as contractors and consultants.

Agencies are spending tens of millions of dollars a year on contract workers with "no external oversight controls" over whether they were needed or over their qualifications, length of employment or pay.

Agencies spend millions on advertising and marketing without "uniform procedures" to show it was needed or on the selection and evaluation of contractors.

State agencies hiring "contract lobbyists raises a concern regarding state entities' stewardship."

The state's process of public contracting should be more transparent.

But while auditors and lawmakers will regularly look deeply, vertically, into a specific agency and its spending or practices, they rarely look horizontally at spending or practices across all agencies, such as on contracts or travel. The state's accounting system — particularly the "transparency" data open to the public — isn't conducive to such research. State accounting officials said it's optional whether an agency even labels a contract as sole-source, or no-bid.

"There is no single data set I could go to to look at this," said PEER Committee Director Max Arinder. He said state government could learn from the private sector.

"It's the modern concept of enterprise-level data," Arinder said. "Large corporations manage data, whether personnel, procurement, as an enterprise. If they want to know how much money they're spending on hex bolts, they can just pull up who all uses hex bolts and say, 'We spent $20 million on hex bolts.' If I wanted to do that with the state of Mississippi, I would have to go down all these different paths just to figure out who uses hex bolts."

What's the emergency?

State agencies are allowed to approve no-bid contracts of up to a year in duration in an emergency.

State law says this is for emergencies "caused by fire, flood, explosion, storm, earthquake, epidemic, riot, insurrection" or to make emergency repairs to protect public safety. But the law also has a provision for when delay to bid the contract "could cause adverse impact upon the governing authority." This appears to be interpreted loosely.

Moore, at the first meeting of the task force looking into contracts after the Epps prisons scandal, said, "You can do a lot of damage in a year" with emergency contracts. He said he wonders whether state agencies are abusing the provision.

Records show the state since 2010 has let no-bid contracts for more than $130 million for emergency spending. This includes contracts for advertising; computer and legal consultants; large amounts of food for inmates, chickens and pigs; conservators for failing schools; lawn mowing and hedge pruning; janitorial services; and a supervisor for the state's biscuit booth at the State Fair.

Lt. Gov. Tate Reeves said he questions several emergency contacts, including one by the Department of Public Safety for an advertising campaign.

"Unfortunately some agency heads' definition of emergencies is questionable," Reeves said.

DPS last year awarded a more than $1 million emergency advertising contract to Frontier Strategies, a firm owned by political operatives Josh Gregory and Quinton Dickerson. Gregory is a top political and campaign adviser to Gov. Bryant. Dickerson served in a similar capacity for former Gov. Haley Barbour.

DPS did not respond to a request for comments about the emergency contract for the state-federal "Click It or Ticket" campaign. But Dickerson said the agency was trying to bid out the campaign, ran into problems and had to scramble to meet federal deadlines for ads. He said most of the $1 million, 90 percent, went to buy advertising, not to Frontier. He said that because Frontier had been granted an emergency contract, it was prohibited from competing for the contract later when it was put up for bids.

Frontier, with its political connections, has faced questions before about its contracting or subcontracting work for state government.

Dickerson said: "Any of the contracts we have had with various state agencies are a matter of public record, very open and transparent, typically RFPs or bids, and we've lost some and won some … There are a lot of companies like ours that do a variety of work in terms of public relations and advertising that include work for state agencies that are also politically active, and that's the nature of the business."

Reeves said: "There have been a number of these no-bid contracts offered under emergency provisions. We've got to get a much tighter lid on that. We've also got to do more in the realm of subcontractors … We need more transparency. Transparency is a natural deterrent to these things."

The Department of Education recently approved an $8.3 million emergency contract with a company to administer Common Core testing next year. The emergency appeared to be that it couldn't get approval for a longer contract.

The contract review board said the contract should be competitively bid. Education officials countered the board had worked with them on the contract for months and had recommended last spring it be a sole-source contract. Some education advocates said the move was political because of opposition to Common Core.

'Go-to' companies

Once vendors get an "in" with Mississippi government, they appear to benefit from repeat business, often without having to bid, particularly on small contracts and jobs.

Cornerstone Consulting is a small accounting firm, which doesn't even have an office or website. Founded by a former state employee, Cornerstone has over years done millions of dollars of business with the state. It has done contract accounting for at least two dozen agencies, from the state auditor's office to Wildlife, Fisheries and Parks.

Cornerstone has become a go-to company for many state agencies and boards. Cornerstone has helped implement a new state accounting system and helps some agencies draft their budget proposals. Cornerstone's consultants even go before the Legislative Budget Committee to help some agencies present their spending requests. Accountants for the firm have served as property officers for state agencies, to help the state auditor keep track of government property.

Denise DeRossette, who had also worked for former Gov. Ray Mabus' office, said she left her job at the state auditor's office 28 years ago. She was hired by the CPA firm Breazeale, Saunders and O'Neil to start a consulting firm. One partner there, Paul Breazeale, has done extensive campaign accounting work for numerous state politicians and PACS, including Govs. Phil Bryant and Haley Barbour and U.S. Reps. Steven Palazzo and Alan Nunnelee.

"Within 18 months, I bought them out," DeRossette said. "… We found a niche market and have made it work for the last 28 years."

Cornerstone, which usually has about six employees, DeRossette said, also employs former Deputy State Tax Commissioner Alice Gorman.

DeRossette said her company gets state business by "word of mouth." She said most of its contracts are well below bid-requirement thresholds — but it likely wouldn't matter because accounting services are exempt.

"Some of these small boards don't have any employees, or have one," DeRossette said. "One of the boards we do work for, we charge them $450 a month to do all of their accounting work."

Reeves said this points out a need to consolidate the state's more than 200 agencies, boards and commissions, or at least their back-office operations. Such accounting and other work could then be done in-house by state accountants or bid out in a larger contract.

DeRossette said she would "welcome competition."

"But there's not a lot of people who can do what we do," DeRossette said.

And she will believe consolidation of agencies, boards and commissions when she sees it.

"That's been proposed year after year," DeRossette said. "In 1955, the Brookings Institute did a study and said we have too many counties in Mississippi, too."

Reforms stalled

There have been efforts at contracting reform in the Legislature, but they haven't gotten very far.

Last year Turner authored a bill to overhaul the Personal Services Contract Review Board, appointing people from outside government who have no interest in contracts to oversee the process. That bill died in the Senate.

Senate Appropriations Chairman Buck Clarke, R-Hollandale, authored a bill last year that would have provided more scrutiny of retired state workers being hired under contract. It would have required the contract review board to use the same standards as the IRS in determining whether someone was being hired as an independent contractor rather than being hired back to do their old job after retirement.

"One of the criteria of the IRS is that you don't go back and do the same job you did," Clarke said. "And if you are truly an independent contractor, you have multiple clients."

House Appropriations Chairman Herb Frierson, R-Poplarville, said the practice of hiring retirees to continue doing their jobs is widespread and hurting the state's bottom line.

"Instead of us getting the benefit of savings from hiring someone in at a lower salary, we lose that benefit," Frierson said. "In other personnel contracts, they need to be looking whether things could be handled in house, or by a permanent full-time employee cheaper than contracting."

A law passed years ago, authored by U.S. Rep. Alan Nunnelee when he was a state senator, requires state agencies to report the hiring of state government retirees under contract. But most agencies — except the Department of Education — hadn't been regularly reporting. Lawmakers on the budget committee this year pressed agencies to file the reports. Several did, but lawmakers are uncertain whether they have a list of all retirees hired under contract.

Some officials warn that making contract restrictions too tight or eliminating exemptions could hamstring agencies' operations.

Turner said: "I'd rather have that problem, and deal with it, than what we've got going on right now."

Some officials also say competitive bidding for attorneys and other services isn't practicable, but Rep. David Baria, D-Bay St. Louis, disagrees.

"You can bid anything," said Baria, who is an attorney. "RFPs go out all the time for legal services for government entities. I have to price my work based on client's needs every day."

'Wave' of reform coming

Bryant has ordered a temporary halt to the contract review board approving any sole-source contracts. He created a task force to delve into Mississippi Department of Corrections contracts and recommend reforms he says will probably apply to all state agencies.

The governor is also working with Turner and other lawmakers on legislation.

Calls for reform are coming from both sides of the aisle. The House Democratic Caucus has called for sole-source contracts to be "declared illegal" and for legislation to be passed in the opening days of the 2015 session.

"I think the reform needs to reach down as far as local governments," House Democratic Leader Bobby Moak said. "... (The MDOC scandal) has cast a pall or appearance of impropriety on everything."

Republican Turner said he wants a top-to-bottom review of the state's contracting policies and practices and major reform. He said in the past "there was lots of pressure out there" against changes and reform to contracting and spending.

After the Epps scandal, and during the 2015 election year, Turner said he believes his colleagues will ignore special interests and lobbyists and pass reforms.

"I wouldn't want fighting this to be hanging around my neck and dragging me down with it," Turner said. "I believe there's a huge wave out there for change that you could ride on. And if you don't ride it, I think it will turn into a whitecap and get you."

Contact Geoff Pender at (601) 961-7266 or gpender@jackson. gannett.com. Follow @GeoffPender on Twitter. Contact Emily Le Coz at elecoz@jackson.gannett.com or (601) 961-7249. Follow @emily_lecoz on Twitter.

TOP 10 AGENCIES FOR NO-BID CONTRACT AWARDS

Totals include all noncompetitive contracts, including emergency, sole-source, exempt services, and those falling below state bidding thresholds.

Source: Records provided by the Mississippi Department of Finance and Administration

TOP 10 VENDORS FOR NO-BID CONTRACT AWARDS

Totals include all noncompetitive contracts, including emergency, sole-source, exempt services, and those falling below state bidding thresholds.

* UPDATE 12/23/2014: A prior version of this story listed two banks as vendors, as reflected in state records.The contracts in question, however, are with the counties that house these regional correctional facilities.

Source: Records provided by the Mississippi Department of Finance and Administration

BY THE NUMBERS

All figures for no-bid contracts awarded by the state since 2010

• $6,492,797,258 — Combined dollar amount of all the contracts

•$999,999,999 — Highest contract amount on record, awarded to six different vendors

•2,910 — Contracts falling below $100K, the threshold for personnel services bidding requirements

•2,278 — Contracts falling below $50K, the threshold for commodities bidding requirements

•1,807 — Vendors that have won contracts

•151 — Contracts awarded under "emergency" circumstances

•674 — Most contracts awarded by a single agency, the Fair Commission

•54 — Contracts worth less than $100

•29 — Most contracts won by a single vendor, Leicia GeoSystems

Source: Records provided by the Mississippi Department of Finance and Administration

State bid laws and regulations

Purchase of equipment, computers, construction and commodities of more than $5,000 requires at least two written quotes. For purchases of more than $50,000, agencies are required to get competitive bids.

For personal and professional services, contracts of more than $50,000 require three written quotes. Contracts of more than $100,000 require competitive bids.

Exemptions: contracts for the following services are exempt: Accountants, actuaries, architects, attorneys, auditors, dentists engineers, physicians and veterinarians.

Sole-source: Sole source contracts for services may be used when an agency head determines there is only one source for the required service, pending contract review board approval.

Emergency contracts: Emergency contracts are exempt from bid requirements, for up to a year. State law defines emergency as any of the following:

• (a) Caused by fire, flood, explosion, storm, earthquake, epidemic, riot, insurrection.
• (b) Caused by an inherent defect resulting from defective construction.
• (c) When the immediate preservation of order or public health is necessary by reason of unforeseen emergency.,
• (d) When the restoration of a condition of usefulness of any public building, equipment, road or bridge appears advisable.
• (e) In the case of a public utility when there is a failure of any machine or other things used and useful in the generation, production or distribution of electricity, water or natural gas or in the transportation or treatment of sewage.
• (f) When the delay incident to obtaining competitive bids could cause adverse impact upon the governing authority or agency, its employees or its citizens.

Various boards or agencies oversee state procurement and contracts:

• The Personal Services Contract Review Board oversees contracts for personal and professional services.
• The Information Technology Services Board oversees purchase of computer and technology services and equipment.
• The Public Procurement Review Board oversees purchase of commodities and construction.
• The Mississippi Department of Transportation has its own board to approve personal service contracts.
• The attorney general oversees hiring of outside lawyers to represent the state or agencies in litigation, although agencies can hire attorneys on their own for other legal work.